FPI in G-Sec: SEBI will make rules easier for foreign investors, will not ask for more information on investments up to Rs 50,000 crore

Foreign Investors Disclosure: Market regulator SEBI has taken an important step to encourage foreign investment in India. Now foreign investment in Government Securities (G-Sec) has been made easier. The investment limit for foreign portfolio investors (FPIs) has been increased to Rs 50,000 crore, in which they will not have to provide much information about their investors. Earlier this limit was only Rs 25,000 crore.

Only general information will be sought from FPI

SEBI has clarified that while investing in government securities, only that information will be sought from foreign portfolio investors, which is mandatory for the Reserve Bank of India (RBI) and the Central Board of Direct Taxes (CBDT).

Main objectives of this initiative:

1. Increasing turnover of security market.
2. Making the investment process transparent and simple.

This rule applies only to government bonds

SEBI whole time member Ananth Narayan said that this new policy will be applicable only for Government of India bonds (G-Sec).

• Private Bond: The existing rules for investment in private bonds will remain applicable as before.
• No details required: Foreign investors will no longer be interrogated as to who their investors are, or why they have large holdings in a particular security.

Consultation paper released on Friday

SEBI released a consultation paper on Friday, in which:

1. Increasing the investment limit was discussed.
2. New proposals were introduced to simplify the process of investing in government securities.
3. Its objective is to increase daily market volume and eliminate barriers for investors.

This consultation paper is an extension of SEBI’s August 2023 circular, in which provisions were made to further simplify the process of investment in government securities.

Potential benefits of the new rules

1. Increase in foreign investment: The new rules will attract more foreign investors.
2. Market stability: Turnover in the government bond market will increase due to easier rules.
3. Transparency: Seeking limited and relevant information will maintain transparency in the market.